With Interest Rates Rising How Do I Find the Cheapest Loan?

February of this year Congress decided to slash $12.7 billion over the next five years from the federal student-loan program and boost interest rates on the most popular loans.

A few weeks earlier, the U.S. Supreme Court gave the government even more power to go after delinquent student loans, even if the borrower is elderly or disabled.

The government had to pay subsidies to student lenders for many of those consolidated loans and missed out on the higher interest rate of loans it generated itself. It was subsidizing long-term loans at short-term rates and they said, NO MORE!

When we speak of cheap student loans, clearly we mean that the loan should be of a lower interest rate. There are many ways available to a student where he can get a loan at a cheap rate.

The best-considered way is to look for student loans that are sponsored by the state government who provide subsidy on the loans and the student pays less interest on them.

Such cheap student loans come at a relaxed repayment duration and options as well. If you take a student loan from a private lender, the rate of interest gets cheaper if you provide security to the lender.

Since a student usually doesn't own property, his parents take the loan out for the student offering the security. On securing the loan the lender will surely offer a cheaper rate of interest.

If a student has bad credit due to late payments or payment defaults on previous loans, the best way to overcome that problem is to have a co-signer.

Excellent or good credit of the co-signer gives more assurance of the safe return and the lender is willing to reduce the rate of interest. The last option we will discuss is a home equity loan.

If you are the student, you will most likely have to have your parents willing to help you out in this area with their home. Currently fixed home-equity rates are in the 7 percent to 8 percent range for people with good credit.

Interest on a home-equity loan is deductible on amounts up to $100,000 and you would be able to get a longer payback term than on most any other type of loan.

The best word of advice; work as much as you can before and during your college years and if you do have to take out a loan, use moderation, prudence and forethought.